TEC (Theory) Seminar: Miaomiao Dong, Penn State

Speaker

Miaomiao Dong, Penn State

Biography

I am an assistant professor in the Department of Economics at Penn State University. I am interested in dynamic games, information economics, and behavioral economics.

Title

“Addiction and Bright-Line Personal Rules"

Abstract

To abstain from drugs or maintain low consumption, addicts often adopt bright-line rules, i.e., rules whereby a minor lapse triggers a full relapse. To explain this, I model a quasi-hyperbolic discounter consuming an addictive good, where past use increases current marginal utility. I find that heavy past consumption inevitably traps the consumer in excessive future use. But with low past use, the consumer can—and must—adopt a bright-line rule to avoid this trap. Moreover, any Markov equilibrium without such a rule is Pareto-dominated by one that includes it. These results explain the lapse-activated consumption patterns observed in addiction.